We reviewed the books and records of Saint Timothy’s Tower (project), a 114-unit U.S. Department of Housing and Urban Development (HUD)-insured (Section 236) Section 8 multifamily project consisting of 1 high-rise elevator building located in Compton, CA. We initiated the review in response to a request from the Departmental Enforcement Center due to its concerns about the owner’s use of project funds. Our objective was to determine whether the project was administered in accordance with HUD rules and regulations. Specifically, we wanted to determine whether project funds were used for eligible purposes and whether the project was decent, safe, sanitary, and in good repair.

The owner/agent improperly used or lacked supporting documentation for the use of $286,326 in project funds. The owner/agent inappropriately used $154,421 in project funds for nonproject (ineligible) purposes in violation of its regulatory agreement. The ineligible uses included $94,815 for senior enrichment; $30,560 for a vacant lot; and $9,358 for lobbying, donations, and entertainment. Additional improper uses consisted of $8,388 paid to a resident to assist management in providing ineligible senior enrichment activities and unauthorized loans of $11,300. The owner also lacked documentation to support disbursements of $95,036 in office salaries and $36,869 in bad debt expenses.

The owner’s procurement activities were also not adequately supported in accordance with HUD requirements. As a result, the owner did not ensure that it obtained $146,058 in goods and services at a reasonable cost and in accordance with HUD rules and regulations.

Finally, the owner did not always ensure that the project was decent, safe, sanitary, and in good repair. Our inspections revealed that the building and 18 of the 32 units inspected did not meet HUD’s physical condition standards for HUD housing.

We recommend that the Director of HUD’s Los Angeles Office of Multifamily Housing require the owner/ agent to (1) repay the project operating account $143,121 used for ineligible expenses from non-Federal sources; (2) support $36,869 in bad debt expenses or repay the project’s operating account from non-Federal sources; (3) discontinue the practice of using project operating funds to pay for payroll advances; and (4) establish and implement controls and procedures to ensure compliance with the regulatory agreement and other HUD requirements for documenting payroll, using payroll advances, and maintaining procurement documentation and to ensure that all units, common areas, and the emergency call system are decent, safe, sanitary, and in good repair. We also recommend that HUD perform a limited review of St. Timothy’s Manor’s ineligible senior enrichment expenses.